Xiaomi to shift from online-only strategy, ties up with Redington to sell via offline stores

In a shift from its online-only strategy, Xiaomi is entering into a tie-up with Redington to distribute its smartphones in the offline retail dominated Indian market.Gulveen Aulakh | ET Bureau | August 08, 2015, 08:32 IST

In a shift from its online-only strategy, Xiaomi is entering into a tie-up with Redington to distribute its smartphones in the offline retail dominated Indian market.NEW DELHI: In a major shift from its online-only strategy, Xiaomi is entering into a tie-up with Redington to distribute its smartphones in brick-and-mortar stores in the offline retail dominated Indian market.

The Chinese smartphone maker’s move would make its smartphones available to a much wider consumer base, underlining the importance the company is giving to the South Asian nation that has become its largest market outside home.

The programme will begin on a pilot basis from 10-15 top cities over the next one to two months, starting next week. The model will then be perfected before scaling up to cover all major cities.

"We would be starting a new channel of sales in unorganised retail market in India by partnering with Redington," said Manu Jain, head of India operations at Xiaomi. "Over next few months, we may add one or two more partners," he added.

Jain expects offline to be onefourth or one-third of its total sales within a year, up from 10 per cent at present. The contribution will likely be similar to that in China, where 30 per cent of its sales come from operator bundling and offline retail sales.

Xiaomi said it has prepared inventory to meet the demand which it expects to surge as a result of selling through offline stores. But it will begin with smaller quantities while keeping prices same across all online and offline retail channels. Its four models — Redmi 2, Mi 4, Mi 4i and Mi Pad — will be sold at Rs 5,999, Rs 14,999, Rs 12,999 and Rs 12,999, respectively.

Analysts said while Xiaomi’s move into the offline space would benefit it immensely, lack of control on margins given to distributors could threaten the competitive advantage it enjoys by selling through multiple online channels and limited retail stores.

Jain differed. "We will have to give out margins but the business also expects return on investment. But if you can predict demand more accurately, then the same money can generate much higher sales, profit and return on investment (ROI), rather than using it for blocking inventory," he said. He said the effort will be to get partners to have much higher ROI while maintaining supply chain, margin and price parity across channels.

The company, which is valued at more than $45 billion, has taken the top spot in its home market of China on the back of online-exclusive flash sales. Xiaomi entered India in July last year and till the end of this June, sold over 2.8 million units.

It tested the offline waters earlier this year by partnering with Bharti Airtel where it made its Redmi Note 4G available in the telco’s retail outlets.